The Psychological Contract in Times of Change


It is widely acknowledged that the influence of the unwritten ‘psychological contract’ between employer and employee, is greater than that contained in formal contracts of employment. Whatever an employee believes is the bond between them and their employer, becomes their reality and forms the basis of complaint and disillusion if they feel negatively affected by any decision imposed upon them.

At times of change, therefore, despite rational statements set to justify commercial reasoning and decision-making, those affected by it will see it as breaking the ‘real’ contract that has bound them together for years.

Historically, in more paternal organisational cultures, the employee bought into the understanding that, if they kept their head down and their nose clean, their organisation would look after them: recognise and reward their efforts, develop them for future promotional opportunities and provide/take care of them from a welfare perspective. That is what employees think – it is the ‘cradle to grave’ philosophy that existed in most companies until global pressures in the late 1970’s started – but only started - to cause the paradigm shift.

The shift, however, was applied by organisations but they failed to instil the real implications of this change to their staff. Statements and published articles explained that companies could not guarantee on-going employment and development as in previous years, and that employees needed to take greater responsibility for their own future. Their managers, senior managers and executives however, continued to expect the same commitment from their staff – expecting them to maintain their side of the old psychological contract but with the company no longer honouring theirs.

For employees, therefore, there was no real step change in the system – just a slow and emerging awareness that ‘they’ didn’t care about ‘their’ employees anymore! And how often do we hear that today?

Management style was clearly slow to adjust, as those in positions of responsibility had no real understanding themselves of what was changing and how it would affect them ultimately on both a professional and personal level. They just didn’t see that they too were becoming more vulnerable. Even now, this situation is still evident right across the spectrum of private and public organisations, whether large and long-standing or smaller and more recently emerging SME’s.

Many ‘change management’ theories deal with the structural or procedural aspects of change, which have served commercial objectives to a point. However, it is the psychological barriers that are probably the greatest challenge that stands between complete antagonism and smooth transition.

Employees work to earn money, to pay their bills and ensure the comfort and well-being of themselves and their families. It is a modern day survival instinct equivalent to what drove our hunter-gatherer forefathers and is hardwired into our DNA.

Organisations ignoring it will be challenging the viability of proposed changes.

Career Inspirations has c.25 years’ experience in helping organisations through change, working closely with them in both the planning and execution of transformation programmes.

If you are planning change, we ought to speak.

Bernard Pearce Bernard@Career-Inspirations.co.uk


Executive Career Transition Coach, with a reputation for inspiring, focusing and transforming the careers of senior executives who seek to realign direction, establish new objectives or challenge personal barriers. Recognised as an…


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